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SOURCE PwC US
Electronic Home Video Over-the-Top and Digital Music Streaming See Fastest Growth in Consumer Spending
NEW YORK, June 3, 2014 /PRNewswire/ -- As the entertainment & media (E&M) industry continues its digital shift, advertising growth is outpacing consumer spending, according to PwC's annual Global Entertainment and Media Outlook 2014-2018 – an in-depth five-year outlook for global consumer spending and advertising revenues directly related to entertainment and media content – released today. Attracting, retaining, and monetizing the digital consumer remains challenging and requires businesses to apply a 'digital mindset' to build the right behaviors to move from a digital strategy to a business strategy fit.
The Outlook forecasts that global E&M spending is expected to rise from $1.8 trillion in 2013 to $2.3 trillion by 2018, growing at a compound annual growth rate (CAGR) of 5 percent. The U.S. remains the largest E&M market, growing at a 4.8 percent CAGR and reaching $724 billion by 2018, from $573 billion in 2013.
Globally, digital E&M spending (excluding Internet access spending) is expected to grow at a 12.2 percent CAGR between 2013 and 2018 and account for 65 percent of global entertainment and media spending growth by 2018 – almost two out of every three dollars. Digital spending in the U.S. is expected to grow at an 11.2 percent CAGR over the next five years and account for 45 percent of overall U.S. E&M spending growth, up from 33 percent in 2013. U.S. digital advertising is leading the way; 40 percent of total advertising growth is expected to be digital by 2018.
According to Outlook, E&M companies should operate with a digital mindset. This requires adopting three behaviors: forging trust with consumers; creating the confidence to move with speed and agility; and empowering innovation.
"The consumer is now at the center of their own entertainment and media world, pivoting from finding to being found by content experiences via every channel and device," said Ken Sharkey, PwC's U.S. entertainment, media & communications practice leader. "The battle for relevancy has never been greater as E&M businesses are being joined by companies from other industries such as retailers, automakers and utilities to compete head on for the same consumer relationship. E&M businesses may need to look beyond technology, and adopt more flexible business models that allow them to get closer to the consumer. What's important to the consumer is the specific experience – whether it's live or on-demand and on any screen."
Mobile Internet penetration is expected to reach 86 percent of the U.S. population in 2018, which will help drive digital advertising to increase its share from 17 percent of total advertising revenue in 2009 to 40 percent by 2018. With Internet advertising in the U.S. growing at a 9 percent CAGR (compared to a total advertising CAGR of 3.7 percent), the industry is approaching a significant tipping point.
Advertising is spearheading the digital migration as it follows eyeballs online:
Spending on digitally delivered content will only account for 16 percent of U.S. consumer spending in 2018 (excluding spending on Internet access), compared to 40 percent of total advertising spending. In PwC's analysis, the growth of '24/7 access' and micro-transactions indicates that the key to monetizing the digital consumer will require E&M companies to be innovative in offering more consumer choice and experiences.
"As entertainment and media companies increasingly cross traditional boundaries to compete in each other's core area, the race to achieve relevancy to the individual consumer and a greater share of lifetime value is expanding," said Deborah Bothun, PwC's U.S. advisory entertainment media & communications leader. "Those players that achieve relevancy can join the consumer's 'inner circle of trust'. To stay there, they'll need to apply innovation and agility to keep pace with the roll-out of new ways to deliver, package and price content and services."
Notable fast growing U.S. consumer sub-segments to watch:
U.S. advertising growth by segment
Overall, U.S. advertising is expected to increase at a 3.7 percent CAGR from $206 billion in 2013 to $247 billion in 2018. Video games are expected to average 12.1 percent CAGR, followed by Internet advertising at 9 percent CAGR. Television advertising, the largest segment, is expected to grow at a 4.9 percent CAGR and out-of-home advertising at a 4.7 percent CAGR. Music and filmed entertainment advertising are expected to grow by 2.8 percent and 2.4 percent CAGR, respectively. Radio advertising (1.2 percent CAGR), business-to-business (0.9 percent CAGR) and magazine publishing (0.6 percent CAGR) are all expected to have slower growth. Newspaper advertising (-5.8 percent) is expected to decline.
U.S. segment highlights
In the U.S., Internet access is expected to continue to outperform all other E&M segments, with double-digit gains of 11.4 percent CAGR expected. Internet advertising (9 percent CAGR), video games (6.2 percent CAGR), TV advertising (4.9 percent CAGR), out-of-home advertising (4.7 percent CAGR) and filmed entertainment (4.7 percent CAGR) are expected to grow more than 4 percent compounded annually.
Business-to-business publishing (3.7 percent CAGR), radio (2.1 percent CAGR), music (1.9 percent CAGR), TV subscriptions (1.3 percent CAGR), consumer and educational book publishing (1.2 percent CAGR) and consumer magazine publishing (0.3 percent CAGR) are expected to generate modest growth.
Spending on newspaper publishing (-4.4 percent CAGR) is expected to decline moderately.
Overall, U.S. consumer/end-user spending is expected to grow by 2.7 percent CAGR.
About the Outlook
PwC's Global Entertainment and Media Outlook 2014-2018, the 15th annual edition, contains in-depth analysis and historical and forecast data for advertising and consumer/end-user spending in 13 major industry segments across 50 countries. Find out more at http://www.pwc.com/us/em/outlook.
Segments covered by the Outlook
Business-to-business, consumer and educational books, consumer magazine publishing, filmed entertainment, Internet access spending: wired and mobile, Internet advertising: wired and mobile, newspaper publishing, out-of-home advertising, radio, music, television advertising, TV Subscriptions and license fees and video games.
Digital spending consists of broadband and mobile Internet access; online and mobile Internet advertising; mobile TV subscriptions; digital music; electronic home video; online and wireless video games; digital consumer magazine circulation spending; digital newspaper circulation spending; digital trade magazine circulation spending; electronic consumer, educational, and professional books; and satellite radio subscriptions.
Historical information is obtained principally from confidential and proprietary sources. PwC analyzes recent trends in industry performance and identifies factors underlying those trends. Models are then developed to quantify the impact of each factor on industry spending. Forecasts are also based on an analysis of the dynamics of each segment in each region and on the factors that affect those dynamics.
About the PwC Network
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day
Learn more about PwC by following the firm online: @PwC_Entcomm, LinkedIn, Facebook, Instagram, YouTube and Google +.
© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
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